Policy Brief Series

Policy Brief No. 4

Back to Basics

The policy brief on the root cause of the current financial crisis is published in Ideas At Work of Columbia Business School.

Policy Brief No. 3

Using Fair-Value Accounting, Fairly

The policy brief on fair value is published in Ideas At Work of Columbia Business School on the basis of  CEASA White Paper No. 2.

Policy Brief No. 2

Timely & True from an Owner's View: Shareholder Value Accounting for Performance-Contingent Claims

Policy Brief No. 1

Timely & True from an Owner's View: Shareholder Value Accounting for Employee Stock Options

Policy briefs Nos. 1 and 2 summarize parts of "Debt vs. Equity: Accounting for Claims Contingent on Firms' Common Stock Performance, with Particular Attention to Employee Compensation Options", Columbia Business School, CEASA White Paper No. 1.

 
 

White Paper Projects

White Paper No. 3
 
Jan. 22, 2013
Topic: XBRL and Interactive Data White Paper
 
 
Since the U.S. Security and Exchange Commission’s 2009 mandate that portions of 10Ks and 10Qs be submitted in a digitized format known as eXtensible Business Reporting Language (XBRL), issuers and others have questioned the usefulness of the resulting data now available. As early promoters of “interactive data,” Columbia Business School’s Center for Excellence in Accounting and Security Analysis (CEASA) undertook a review of the state of XBRL and interactive data with a focus on their utility for security analysis. This project involved interviews with representatives of the various stakeholders (i.e., preparers, regulators, analysts and investors, XBRL developers, data aggregators, and XBRL filing and consumption tool vendors), and an in-depth discussion with and survey of investors and analysts. The survey and interview questions, and our conclusions, were organized around the original vision for interactive data—i.e., that data in this format would provide incrementally more relevant, timely, and reliable information to more end users, who could then manipulate and organize the data according to their own purposes at a lower cost. 
 
This paper investigates the usefulness of the resulting data that were availabe at the time of publication. In our view, XBRL has succeeded in so far as the objective of providing users with free, interactively-available numerical data from portions of published financial statements and footnotes, as soon as they are filed with the SEC. Most of the analysts and investors we spoke with are interested in and tried to use the footnote data that are XBRL-tagged. However, this access has not translated into ongoing current use by investors and analysts for many reasons which the report articulates in more detail. With this in mind, we provide our general conclusions and make some recommendations. Access this project, including any associated presentations or documentation.
  

White Paper No. 2

Jul. 1, 2008
Topic: Fair Value Policy White Paper

Principles for the Application of Fair Value Accounting

This paper, the second in CEASA’s White Paper series, lays out principles under which fair value accounting is appropriate. Its “principles-based” approach embraces broad economic concepts but is also pragmatic and specific enough to guide practice. Accordingly, the pros and cons of fair valuing bank loans, core deposits, inventories, investments in subsidiaries, insurance contracts, performance obligations, and debt, to name a few balance sheet items, are resolved, leading to formal financial statement templates for the application of fair value accounting in specific industries.

For non-financial firms, fair value accounting under the principles is largely limited to assets and liabilities associated with financing activities. For operating assets and liabililties (employed in the business), fair value accounting is not appropriate, except in the case where their value under the business model varies one-for-one with market prices. The application of fair values is a little more complicated in the case of financial institutions where so-called financial assets and liabilities are employed in the business. But the same principles apply such that fair value is again appropriate when the value of these assets and liabilities varies directly with market prices rather than from their use in the business model. Access this project, including associated documents.

White Paper No. 1

Jan. 3, 2005
Topic: Debt vs. Equity White Paper

Debt vs. Equity: Accounting for Claims Contingent on Firms’ Common Stock Performance With Particular Attention to Employee Compensation Options

This White Paper lays out a comprehensive solution to the problem of accounting for claims based the performance of a firm's stock price. The accounting covers employee stock options, stock appreciation rights, put and call options, convertible debt and preferred stock, warrants, and other hybrid securities. This issue has vexed the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) who have approached the problem on a piece-meal basis, leading to inconsistent treatments of claims that in substance are very similar. Access this project, including associated documents and presentations.